Mutual Fund investors - KYC through a KRA

KYC is an acronym for “Know your Client”, a term commonly used for the Client identification process. Basically, the identity and address of investors is verified. All applicants must be KYC compliant while investing with any Mutual Fund.

However investors may need to open accounts with other SEBI registered intermediaries for the purpose of trading / investment in the securities market, and have to undergo the same process of KYC again and again. Therefore, to avoid duplication of the KYC process with every intermediary, a mechanism for centralization of the KYC records has been developed by SEBI. W.e.f January 2012, SEBI has introduced a common KYC application form for all the SEBI registered intermediaries viz. Mutual Funds, Portfolio Managers, Depository Participants etc.

I. KYC to be verified by a KRA

Earlier each financial intermediary  like depository participant would do its own KYC and register an investor account. For Mutual Funds the process was centralised with CDSL Ventures Ltd (CVL) and MF investors would go to any Point of Service of CVL and submit the KYC form.

Now SEBI allows KYC verification for all SEBI intermediaries through a KYC Registration Agency (KRA). There are expected to be a few KRAs servicing investors. However, currently the only KRA is CVL. I will update this post with details of other KRAs and please comment if any reader has information on other KRAs.

II. Process for first time investors in Mutual Funds:

Such investors who have not completed the earlier KYC process with CDSL Ventures, should do the following:

1. Download the KYC application form here and fill in the details  - all requirements for proof of address and proof of identity are given therein.

2. Mutual Fund investors have to currently submit this form only along with a transaction slip for purchase / switch of units. I understand that a stand-alone from is not accepted! Therefore, fill in the application form for purchase of units and submit to the Service Centre along with this form.

3. Investors would have to visit the Service Centre of the Mutual Fund (or Registrar, if the Fund has authorised the Registrar) and submit the form in person.

4. (In-person verification) IPV of the documents has to be done by the AMC or the intermediary.

5. The MF Service Centre executives will scrutinize and stamp the application form -  KYC APPLICATION RECEIVED. This is itself a confirmation of submission of the form and documents.

6. Documents will be forwarded by the intermediary i.e. the Mutual Fund to the KYC Registration Agency (KRA) and the KRA will send a letter to the investor within 10 days confirming the details.

7. This IPV at the Mutual Fund Service Centre is sufficient for an investor to start investing, while the KRA completes the rest of the process. (Attach the KYC acknowledgement with future transaction slips till KYC is verified)

8. Investors may check here --> https://www.cvlkra.com/ if KYC is verified successfully. Once verified, investors can attach the screenshot whenerver they invest.

9. Once an investor status is verfied, any SEBI registered intemediary can upload the investor KYC status from the KRA and investors need not undergo the process again.

III. Mutual Fund investors who are already KYC Compliant earlier with CVL

Many investors have already completed the process earlier with CVL. This is still valid - but only for investing in Mutual Funds. If they wish now to register with other intermediaries in the securities market, they have to go through the process once more!!! It is advised that they complete the process with a KRA.

If any reader has additional details and clarifications on the KYC process, please comment and share. I will update this post.

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Mutual Funds: Paperwork - changing bank details

Recently a colleague tried to change his bank details in a mutual fund folio. Not being in touch with the new rules, he was surprised when the request to change bank details in his account was rejected.

Being of vital importance, I wish to share the requirements for successfully registering a new bank account in mutual folios. In addition we will look at the new facility of adding additional bank accounts in your folios.

I. When you give a letter asking for the bank details to be changed:

The below documents are required along with your request letter for BOTH the new bank you wish to enter in the folio as well as the old existing bank account which is already registered:

An original cancelled cheque leaf where the account number and first unit holder’s name is printed on the face of the cheque (for both the old and new bank accounts). 

OR

Since many banks do not print the customer name on the cheque, a copy of the bank pass book or statement having the name and address of the account holder (again for both the old and new account). The copy should be certified by the bank manager with his / her full signature, name and bank seal and contact number.

OR

A letter from the bank on its letterhead certified by the bank manager with his / her full signature, name, employee code, bank seal and contact number certifying that the unit holder maintains/maintained an account with the bank, giving details of the account (When the old bank cheque leaves / recent statements are not available).

If you do not wish to submit the originals, you may also bring a copy of any of the documents mentioned above along with the original documents to the Service Centres of the Fund. These can be verified over the counter and returned.

On checking with the Funds, the executives answering my calls were particular about these details. Explanation was given that avoiding incidences of fraud was the reason these details were required and while investors might be inconvenienced, they should look at these requirements as a means to safeguard their interest. 

II. Register additional bank accounts in your folio

All Funds now offer a facility to register up to 5 bank accounts for individuals in their folios. A form is available at all fund websites for addition / deletion of bank accounts and this is to be filled, signed and submitted with the attachment described above as proof of the additional account(s) (a cancelled cheque leaf with name printed / bank statement attested by the bank manager or by the Fund counter staff). 

Once you have registered additional accounts, if any account is closed at a later date, just fill the same form for deletion of an account. No  attachment would be necessary.

Default Bank Account: Any one bank account should be chosen as a default bank where all dividends would be paid out. You may ask for a redemtpion to be paid to any of the accounts and if you do not mention any bank in the transaction form, it will be paid into the default account. It is recommended that all investors register all their bank accounts in their folios. 

Point to note:

If you submit a change in bank details along with a redemption, it is likely that funds do not process the change in bank details and pay the proceeds to the existing account. 

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Mutual Fund SIPs vs Stock SIPs

While the SIP concept is accepted and popular for Mutual Funds, we find stock SIPs being advocated.

An SIP  in a fund which allows you to invest in a fund through regular installments over a length of time, works well. However, the same concept applied to individual stocks will significantly increase the risks to your portfolio.

Mutual Fund SIPs

The inherent advantages gained by investing in Mutual Funds, along with the advantages of systematic investing have proved beneficial. 

A few relevant advantages you get from a Mutual Fund SIP are highlighted

• No need of market timing and stock selection
• Cost averaging – You get more units when the market is low and similarly buy fewer   mutual fund units when the markets are high.
• Light on the wallet: You can commit small amounts to invest in a larger portfolio
• Risk is spread - you buy into a whole portfolio of stocks across market cap/sectors  depending on the Fund

Most of us invest in equity funds because we believe that they will deliver better returns than most other avenues over the long term.  However, the fact is that individual stocks don't deliver returns in an orderly fashion.

Stock SIPs

With mutual fund SIPs extremely popular, many brokers and trading platforms today offer SIPs in individual stocks. Just like in Mutual Find SIPs, investors can accumulate a stock by buying it based on standing instructions at a frequency of their choice.

However, in the case of individual stock SIP you are exposed to:

·   Concentration risk: SIPs in an individual stock may result in portfolio concentration and large exposures to a single asset. The same in a mutual fund SIP would mean the same amount spread across a diversified portfolio of stocks. If that one stock takes a beating due to company / sector specific factors…

·    Risk in selection of stocks: The second risk arising from stock-specific SIPs is that you could well be accumulating the wrong stock... Since investments are automatic and set, it would mean that while you are accumulating more and more of an asset, you may not monitoring and rebalancing. It is our view that if investors are not well informed and nimble, this could harm investor interest.  Especially, in today's environment, where regulatory changes, fluctuation in the currency value, loss of a big client can cause a drastic shift in a company's fortunes.

Even savvy investors find some choices going horribly wrong. Stock SIPs would mean bigger bets, month after month, on a few stocks of one’s own choice, which can subject one’s portfolio to considerable damage.

In conclusion:

If one chooses to invest in stocks, one can do so based on research and deliberate investing. Automating an investment in stocks will mean automatically investing in an asset even if the situation warrants an exit from a stock.


Investing in an active fund would mean that the fund manager is likely to be closely monitoring the portfolio and replacing stocks at regular intervals to be able to beat the benchmark.  This is the real benefit of an SIP in an equity fund.


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A lighter look at Annual Appraisals!

A friend who recently completed his annual appraisal, commented that the most important financial event in a professional's life is the Annual Performace Appraisal. His take on appraisals is reproduced...

Now, your communication skills are activated. They were always there - but in dormant condition. You are a picture of eloquence, when writing about yourself.....descriptive words, phrases, adjectives and adjectival clauses hitherto never part of your diction now garnish your write-up. Maybe this is the best way to learn to acquire Presentation Ability --- presenting yourself !!!!!!

People are at their creative best now. Suddenly everyone has turned into Merlin the Magician, conjuring up accomplishments out of nowhere.

As one fills in the several columns in the online appraisal form, one  discovers new facets about oneself. Latent talents, skills, abilities all surface during the period of the appraisal - only to become latent again after the 31st!

Self help books become redundant - you already have discovered yourself to be the best and a winner - only the appraisers dont think so! Maybe they need the self help books!

While filling details of 'Performace during the year', why cant they have more than 100% as an option! Not fair to those who score 1000 out of 100.

You rate yourself highly on your ability to train others; only forgetting to mention that your knowledge may be vague - but the ability is there! One is surprised about being asked about one's reliability -  we all experts in relying on our subordinates to complete all tasks. Only, they rely on their subordinates.... and it does not  matter that the final guy is not reliable.

An ex-employee is known to have rated himself "excellent" in his 'Communication Skills'. Whenever words failed him, he used sign language effectively! 

As it comes to a close and one is asked about one's strengths and improvements, as a guy once told me - "There is scope for improvement always - others' improvement!" Strengths fill in a 2 MB word document.

As one ends, one can look back at his/her creation in satisfaction - the place wont run without him, in fact can't run without him.

As they say - 'There is a fine line between fact and fiction'

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First Baby Steps in Investing

You are a working professional and have started your career. Early earnings have been spent buying that iphone, ipad, those special running shoes and in a holiday to Malaysia with friends. But at the back of your mind an alarm starts to ring! 

There is the thought, “I must plan for the future, save and build my assets. But… where do I start… What can I do with the few grand that remains at the end of the month?"

Your initial steps now would go thus:

First you require a PAN. In all probability you already have a PAN which you have submitted to your employers. Here's where you can apply if you do not have one. It is a simple process.

Second, make sure you get yourself KYC Compliant to apply in mutual funds. KYC compliance is necessary to apply in any Fund.

Third, open a demat account with a Depository Participant. It’s not too difficult. Many banks offer the service and check with your banker if you can open a demat account. Having an account is essential to purchase debentures, tax savings bonds and later equity shares.

How much to set aside:

Financial planners recommend setting aside a minimum of 10 to 15 % of your gross income to save or invest systematically at regular intervals for the future.  A systematic investment plan (SIP) in a mutual fund is recommended to start your investing life. SIP is a plan where an investor makes regular, equal payments into a mutual fund. The advantage of an SIP is that you can set aside small amounts – the few grand remaining - to suit your convenience.

Power of compounding:

Check out This SIP Calculator . Even Rs 3000.00 set aside every month from the start of your career for 30 years will amount to > Rs. 1 Crore at a reasonable 12%. Save Rs. 10000 and the amount is 3.5 Crore. Start now!!

Mutual Funds:

Do take the help of a financial advisor and assess your risk profile and decide what percentage of your savings you wish to put in Mutual Funds representing equity and what percentage in FDs etc. representing debt. Having understood what a mutual fund is, you know that investing via an SIP is the best method to avoid timing the market and have a disciplined approach to investing and you can start with small amounts.

You may consider starting with about 3 schemes in different funds.  So, if you are investing Rs 6,000 a month, invest Rs 2,000 each into three different schemes. You could start with one Large cap Equity Scheme, one Multi-cap Equity Scheme and one Balanced Fund.

Even while taking the help of an advisor, it would be good for you to track and check fund performance and reviews. Some websites you can go to for reference on Fund performance are - Mint 50 , Money Control, Value Research. There are many more which offer useful data and review.

While filling in the forms, use the auto-debit option for direct debit of your bank account. This way, the amount is automatically deducted at the beginning of the month itself, preventing you from overdrawing!!! Look here for Hints for filling SIP forms.

Small Saving Schemes:

Investing PPF is a must for tax benefits – Read this comprehensive piece for knowledge on investments in the Small Savings Schemes - Small Savings - Big Benefits

Bank Deposits:

See this article in the Business Line on The Best FD Rates for knowledge of the rates now.

Great!! You’ve now taken your first steps to invest in a financially secure future. Do remember to monitor your investments regularly.

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